Just when you thought it was safe to call your broker, investor confidence takes another nasty upper cut to the chin.
With the Nortel Networks crash sinking investor sentiment to its lowest point since the Bre-X scam, a recent survey of more than 1,400 Canadian financial advisers for leading brokerages and financial advisory firms shows that only 53 per cent of advisers designed an asset mix for 100 per cent of their clients.
Designing an asset mix is the least that one should expect from an adviser but, according to the survey, about half of the advisers aren’t doing their jobs.
To put it bluntly, about half of the people who use full-service brokers or advisers are driving down the street and throwing money out the window. They are paying exorbitant commission fees for service that stinks.
The survey was conducted by Headspring Consulting, a Toronto-based firm that provides ideas, strategies and solutions to the financial services industry and to Canadian consumers.
Headspring president Sandra Foster has authored best-selling books on investing such as You Can’t Take It With You and Who’s Minding Your Money?
“Designing an asset mix is an essential part of the investment management process,” says Foster. “Without defining what percentage of the portfolio will be held in cash, fixed income and equity investments, Canadians may be missing important portfolio decisions that could help them actually reach their financial goals.”
An asset mix could also have softened the blow of the Nortel disaster for many investors.
Headspring’s survey also shows that only 41 per cent of advisers used risk-tolerance questionnaires with 100 per cent of their clients and only 16 per cent prepared written investment policy statements for all clients.
Having used a full-service broker before going to an online discount broker two years ago, this is not earth-shattering news.
I recall paying $100 to $200 per trade (I now pay $27 through E*Trade) for a broker who went on vacation without telling me. I remember losing about $500 on a tanking stock while spelling my name to a broker pinch-hitting for mine, who was on a beach somewhere enjoying a cocktail on me.
What folks need to realize is that many brokers are glorified salesmen, pitching the brokerage house’s stocks or mutual funds.
But you should also know that there are some terrific advisers that can be unearthed with some research.
If your adviser didn’t advise you to take profits when Nortel was in the $100 range, hasn’t shown a genuine concern for your financial well-being and sounds like a pushy used-car salesman when pitching a stock play, you may want to give the tire-kicker the boot.
It might turn out to be the best investment decision you ever make.
PRO'S THREE STARS
Few investment gurus have been able to discover raging bulls among non-energy stocks in the recent bear market.
Josef Schachter has done just that.
The president of Calgary-based Schachter Asset Management picked a tech stock in January, Advanced Micro Devices (AMD-NYSE), and cashed it out at more than a double.
“We sold it in the low $30s,” says Schachter, who recommended the stock at $13.81 (its recent price is $24.67).
Schachter, who also picked two other winners in January, Gulf Canada Resources (GOU-TSE) and Elk Point Resources (ELK-TSE), is up 47 per cent with those picks. His latest picks are CMGI Inc. (CMGI-Nasdaq), Gulfstream Resources (GUR-TSE) and Equatorial Energy (OZ-TSE).
“CMGI is an Internet company with a basket of different businesses which is like the portfolio approach to the Internet business,” Schachter says of CMGI (recent price, $2.92, year range, $1.75-$54.81). “This was a $300 stock in February-March of a year ago. The cash and marketable securities are almost equal to the stock price and you’re getting the whole Internet businesses for free. That’s how cheap these stocks have become with everybody saying: ‘Get me out, I can’t stand the pain.’ ”
Gulfstream, which has put itself up for sale, has a recent price of $1.83 and a year range of .60-$2.14.
“They have big assets in Omar, Qatar and other areas in the Middle East and they have a growing production profile,” says Schachter. “We should hear in the next few weeks about a takeover.”
Schachter says Equatorial (recent price, $3.30, year range $1.90-$4.20) is the “cheapest stock on my radar on the oils.” He raves about the company’s Indonesian prospects.
“I think the oil pricing is very cheap in the high $20s and I think as we head into winter, the demands will pick up,” says Schachter.
Schachter Asset Management owns all three of the stocks.
Schachter is bullish on the market’s near-term prospects.
“I think we’re going to see 11,500 on the Dow (Jones Industrial Average, recently at 10,604) on a summer rally and I think by year end the Dow will go through 12,000 and the TSE 300 (recently at 7,739) will go through 9,000.” Schachter’s Record: +47 per cent (Advanced Micro Devices +79 per cent, Gulf Canada +60 per cent, Elk Point +1 per cent).
* CHEERS: To Calgary-based Oncolytics Biotech and the scientific team that has made another breakthrough in its cancer research. The stock (ONC-TSE) popped about 30 per cent on encouraging results of tests on mice implanted with human brain tumours.
* JEERS: To the Flames and Oilers for looking kind of silly now that Alberta Lotteries has projected proceeds from a lottery for the two NHL teams would amount to about $1 million per team per season. It’s a sad day when pro sports teams rely on the gaming industry for cash.
HOT ALBERTA STOCK: Oncolytics Biotech
ONC-TSE $10.05
Up $2.21 (+28.2%) on 870,712 shares (for week ending June 22).
Most biotech stocks have been quieter than mice in recent months, but Oncolytics came to life with a vengeance – thanks to some perky mice. Scientists for the Calgary-based company demonstrated its products can extend the life span of mice implanted with human brain tumours. After a strangely lukewarm response to the news, the stock blasted off a day later on almost half a million shares. Analyst Joe Tucker issued a strong-buy recommendation on Oncolytics with a 12-month target of $50.
COLD ALBERTA STOCK: Tesco Corporation
TEO-TSE $17.00
Down $4.50 (-20.9%) on 1,421,319 shares (for week ending June 22).
That hissing sound in the oilpatch was the air coming out of the blown-up energy stocks. Some oil-service and drilling companies took the biggest hit, including Calgary-based Tesco, which had doubled off its low of the past year.
